Surface Transforms Share Discussion Threads

[timbo003] 20/3/2024 12:05

regarding TA....the trend is your friend, but watch out for the bend at the end 🙂

[supernumerary] 20/3/2024 11:58

aa - 'On TA analysis alone' - good, so the rest of us can safely ignore it as voodoo investing.

And I see no chance of insider buying before the TU - what would be the point? If the news is bad (and they'll know by now) they'd be just throwing money away, and if it's good, they’d be accused of insider dealing.

[damayhill] 20/3/2024 09:53

Ha, not sure whether I'm a Grumpy (probably), but you certainly appear to have all bases covered there (stone-cold sell and x10-er)! 8th April (likeliest date in my book) isn't far away. Insider buying would help, yes, but a lot of existing investors will be keeping their powder dry for now pending updates and it's also the case that IIs will for the most part be precluded by their own parameters, on the basis of the current MC.

[amanitaangelicus] 20/3/2024 07:47

On TA analysis alone, the graph metrics etc, this is currently a stone cold sell. It is, so dont argue. Until there is some meaningful insider buying, the share price will be going nowhere. The April update cant come soon enough. Cash is king. Nervous. I still cant get over the order book to mkt cap ratio. It s mesmeric. Could be a x5-x10 er if they can solves their problems. Mkt currently saying they can t. Cue the grumpies. GLA

[damayhill] 19/3/2024 20:28

I know what you're saying and the risks are clear but I don't understand the rhetoric that suggests that we already know, when we absolutely don't already know.

I've set it out here before. The £9M (H1) and £14M (H2) split looks credible and in order to achieve the £9M, I'll be looking for a rate of ramp up, so therefore ideally £3.9M Q1 and £5.1M Q2. All we can do is take it quarter by quarter.

The other thing to say is that it doesn't have to be £23M - it just has to be a sufficient number to avoid running out of cash, begin to create free cashflow, and therefore avoid a further raise in a punitive market - there is a little headroom just not very much. The market will respond to likelihood of a raise, not to whether they precisely achieve forecast.

As you suggest, the £23M forecast will also be reflective of what they have indicated they can deliver to their customers - it would be strange if it were anything other. Unlike you, I don't see it as telling customers one thing to the detriment of shareholders, I see it as a double imperative for them to achieve what they have set out. Though they have fallen short of forecasts multiple times, for well documented and explicable reasons, I'd suggest that, if anything, Johnson is quite an under-stated individual.

[damayhill] 19/3/2024 17:06

bones698, to address a number of your points:

- personally, I'd rather have those with carbon ceramic / braking system expertise running the company and supplement that with NED business experience than the other way around.

- show me an enterprise of any meaningful scale where there aren't issues between management and staff. Staff will always say that management don't understand and are divorced from the reality of operations. What management are never able to respond is that staff often have no concept of what's involved in running a business and of the choices and decisions that have to be made.

- I would be very surprised if any of the customers choose to walk away from the process to which they have invested so much. The bigger danger is that the stalled ramp up will deter new customers for the time being.

- Yes of course we expect to see revenue growth because we have every reason to expect revenue growth. They have delivered growth, they have additional capacity to deliver further growth and they must deliver growth. Whether the £23m is quite realistic remains to be seen. We'll likely get the first proper indicator in about three weeks.

[supernumerary] 19/3/2024 16:34

q - thanks

[quemaster] 19/3/2024 14:49

supernumerary, as far as I know before the change in manufacturing strategy the first modular cell and the £5m capacity small production unit transported from the original factory were in place. The Cell was dismantled and parts used in the new production line, whether they were able to use all of it i'm not sure as the new production line furnaces for example are a larger and different design.
I think the £5m SPU was kept in place to make the small run racing and upgrade kit brakes but not sure if this is still the case.

[bones698] 19/3/2024 12:44

Bones I think yourself and others are expecting and assuming a lot from what arenbadiclaly a pair of scientists running the show. You assume they understand and know how to run both a business and aseembly line and how to rectify issues.

For me the ex employee who said there were significant issues between management and production staff wasn't a surprise. This is common place in industry in my experience and seems only to get worse with the involvement of less experienced personal and managers.

The issues are by no means insurmountable but finding a management who can react and correct all these types of issues are rare to find especially in small companies.

Also as I have said before I doubt anyone on here is privy to what small print is in the contracts sce have already and what possible clauses lie within. It remains to be seen how patient some of those customers will be

I think everyone expects to see revenue growth in the figures especially given the a amount of cash they have then at it in recent months. I still don't see 23m as possible though mad also think another cash raise will be required this year possibly. Neither are good news and show the risks even at these levels and why aim and small cap shares are a nightmare for most investors

[bones] 18/3/2024 16:10

Isn’t the whole idea of this capital ramp up to achieve “resilience221; so that a failure in the line does not hold up production? Back up systems for all eventualities.

While I am sure Fevertreeman will beg to differ, I can’t believe SCE will not be prepared for the scenario of a small run trial as described by Supernumerary. Or perhaps they are at the stage where the latecomers will have to wait. Is it not the case that OEM3 and their confounded salt tests mean that, should they now want in, “it’s too late, buddy, the others got there first and we only have so much runtime!”

[supernumerary] 18/3/2024 15:29

They certainly seem to have hit the iron law of unintended consequences :¬( Reading about their attempts to fix them I'm reminded of the wise words of a project manager I used to know - 'You can't solve the problems of complexity by introducing more complexity'...

The related issue I was bothered about was that of very short production runs. If, say, Toyota came along and said we'd be interested in ceramics for our Gen 2 Yaris GR (a WRC homologation special - Gen 1 was limited to 25K cars, and this I assume will be about the same), what can you do?

SCE would have to prepare a proposal, and then do a few trial runs - for internal testing, to prove the production process, to do initial customer testing, followed by a few more for on-car trials, then the production run. All for a total of at the very most of 25K × 4 discs.

Easy to say it's not worth bothering with an order of that size, but it is Toyota, it is a Yaris (ie little hatchback), so it could open up new horizons. Certainly worth thinking about.

But could they do it with one production line? You can't keep stopping the line, so are they running a hybrid system where they also have one or two of the old cells running alongside the main line? These would be used for development work, although that does then introduce the problem of moving from one to another as the production rate for a model increases.

[amanitaangelicus] 18/3/2024 09:42

Cleethorpes wasnt built in a day. Patience. share price will tell y'all as insiders are briefed. You will be the very last to know. It.s an irrefutable law of the morally bankrupt aim circus.

[quemaster] 16/3/2024 21:02

fft The modular system also had potential single points of failure initially but as five were needed to reach maximum capacity there would certainly have been more than one module in 2023.
The plan ST had for the plant flow system was that £50m capacity would be installed by mid year 2023 , as I mentioned in a previous post it didn't happen due to cash issues caused by the furnace downtime.
In hindsight this would of been a good time to raise more money but the furnace issues happened at around the same time a fundraising had just been completed ( Sept 2022 ) so they tried to avoid one.

You say... "they have more than doubled the installed kit but target production is only up 30% for Q1"

All the machinery for £50m capacity may well be on site by now but the completion date is still forecast for mid year, some of it will already be in place but the assembly and commissioning phase can be lengthy for some of their equipment.

[amt] 16/3/2024 07:01

It’s a bit like the M25 construction

Let's hope not, its chaos this weekend

[fft] 16/3/2024 02:51

If Chris Rea ever writes a song about SCE I will be happy. :-)On a serious note, it appears that what you are saying is that SCE built in points of potential failure when they designed and implemented the flow system.That sounds bad. I assume, given the money involved, that someone was hired to design the production line to optimize the process, but that should have also taken into consideration the issues that could arise.I am aware that some of the processes and equipment used was leading edge (for SCE at least). However, as the RNSs emerge it would appear that nearly all the stages within a production run have issues or that is how it sounds from the limited info that has emerged from B and J. Companies either try to minimise the problems or go over the top and given BJ approach I guess that things last year were worse. In emails they were quite forthcoming about the furnace issues and the impact that was having but after that it is obvious from the positive tone in September to the downbeat tone in November (sorry guys we spent all last years fundraise and can we please have some more), that far more unspecified issues have arisen.Oh, and they have more than doubled the installed kit but target production is only up 30% for Q1. Normally, over time, installation and getting kit up and running gets quicker. That point doesn't seem to have been arrived at yet.

[bones] 15/3/2024 12:07

It’s a bit like the M25 construction. In the long run, they should have looked far forward with traffic projections and put up with the extra cost, preparation headaches and inconvenience and built the whole thing from scratch with 5 lanes each side. Instead, they took the standard policy of three lanes and have suffered “single points of failure” ever since, widening it on an ad hoc basis at great cost to the motorist and economy.

SCE are right to build something suitable for the long term with large capacity despite the headaches being suffered in the short run.

[quemaster] 15/3/2024 11:09

In September 2021 when the new plant flow strategy was announced 2023 capacity forecast was upgraded from £35m to £50m and the total cost of completing the £75m capacity was reduced by £10m,

The plant flow system allowed them to install capacity more quickly at reduced cost at a time when OEM8 was effectively saying we will take as many brakes as you can produce, it seemed the best course of action at the time to accommodate OEM demand.

In hindsight having a modular system with proven equipment and no potential single points of failure sounds perfect right now but with rapid capacity expansion to £150m in 2027 and targeting £250m capacity by 2030 the plant flow system should be the best option once the initial problems have been sorted out.

[supernumerary] 14/3/2024 20:09

I'd appreciate a view from some of the car industry and/or large scale manufacturing experts here on a question that's bothering me.

I watched sce for years before buying (I'm a very patient investor) but when they reached the point where they had confirmed orders, an established manufacturing process, a settled and apparently competent and honest management team, I thought it was safe to put money in. That despite my long-stated worry about their lack of marketing/PR/IR skills, and indeed interest in the topic.

As I understood it, they would be moving over time to a more continuous-flow/production line/whatever you want to call it manufacturing process, which would increase capacity while reducing costs. All hunky-dory.

However, they then took on orders they couldn't deliver, needed to ramp up production to have a hope of meeting them, and so embarked on the transition to a continuous production process. We're now all familiar with the problems that induced, which amount to an increased risk of failure (since all elements of the process are needed to make a disc), and an increased cost of failure (since any break stops everything).

So the question I'm struggling with is whether or not switching to an 'any colour you like as long as it's black' process was a good idea in the long term. At the time I bought, I assumed that if they wanted to increase production they'd simply install more of the existing modules (this on a presumption that the existing small units would become cheaper, faster, higher quality etc over time) and thus add another quantum of output. Simples.

But in moving to a continuous process, I fear a lot of flexibility has been lost. It used to be that if one furnace broke, it affected only a part of the production, and similarly if an OEM wanted a short test run, followed later by a short production run, they could both be easily accommodated. If they went into production, just add another module, and similarly if there was a recession, hibernate one or two. Now, all change is to be abhorred, for reasons which have become painfully apparent.

All measured rational discussion of the issue much appreciated.

[damayhill] 14/3/2024 11:12

bones698, I suspect the April TU will not be categorical. The likeliest range could make a future raise moderately more or moderately less likely but I doubt it will resolve the question either way, unless it's awful (ie less than £3.6M Q1 revenue). £3.9M in Q1, followed by £4.8M - £5.1M in Q2 will do me just fine. If H1 is bolstered by a further material contract announcement with, ideally, SOP no earlier than 2027, all the better.

I'm possibly one of those you refer to as trying to work out how to run the company and I'm unapologetic about that. I take my experience of running a £30m+ t/o company to apply what I expect the management to be seeking to deliver, quarter by quarter, and also on a longer-term basis. There is little that I haven't asked myself 'what would I do and what therefore am I looking for?'. That doesn't mean that I'm right, of course!

I've been in investments where a different approach to mine was taken, with great success. I've also been in investments where it didn't matter what I thought or what I was looking for, because the management were literally liars and crooks!

What I would hope for in an investor forum is somewhere that people can bring their different experiences and perspectives to help build a picture, or a range of pictures. Those with less experience will hopefully appreciate and learn from that wealth of input - I know I have in the past. Divergence of opinion is good, fine, and to be welcomed. But there is too much uninformed thinking here (and on LSE too), where 'I make money now' is the only consideration and the biggest contribution people make is a post that says 'Boom' or something equally fatuous. Likewise, 'I'm not making money now' = amateur management, etc.

I made the analogy with the bookies yesterday. In every bookies up and down the land, there's a bloke who backs horses/dogs whilst also declaring to the long-suffering staff that it's going to lose. If it wins, they are The King and will let everyone know. If it loses, they let everyone know that 'I told you it would lose' even though it was carrying their money. I reckon we've got a couple of those in here.

[amanitaangelicus] 14/3/2024 08:13

Website is dire ...cant anyone sort anything out properly? Website sorting sooo easy. Embarrassing. Designed to stop more business coming in?

[bones698] 14/3/2024 04:38

Pink foot I bet there are a few who had listened to me rather than your raping and are now sat on a healthy loss.

My problem here are that some inventors are now trying to figure out how to run a company and whilst it was based on the science and development it looked good but the prrof of them turning from. That to a company that is well run and makes money has proved a very different scenario as shown by the shareprice.

The amount of cash burnt through early this year means they gave very little room for mistakes again and their recent track record has been poor on delivering on their figures. That alone is cause for concern as more failures to hit targets won't be taken well.
Have production issues been resolved? Will they hit 23m this year? Do they have sufficient cash to reach break even whenever that may be?

As stated by damayhill the TU will put some detail to all those things soon enough. I'd rather wait and see as I don't have much faith in the management currently and prefer to see how things stand than risk being like many sat on a loss here hoping things change.

23m this year looks a tough ask still.

[robow] 13/3/2024 15:40

well said Damayhill

[damayhill] 13/3/2024 14:28

There are a lot of pockets talking here - it's more like a bookies than an investor forum.

Johnson and Bundred (who I am not uncritical of at all) take this from a six-figure annual revenue idea to a nine-figure, Tier 1, individual contract winner and genuine market player but as soon as there are any problems, they are amateurs apparently and need to go! Most small firms would have long since failed, where they have so far succeeded. Of course we would all rather there hadn't been production issues and all rather that communications/fundraises had been better handled, but if you can't take the rough with the smooth then you're in the wrong game. Invest in Aviva and take your dividends.

I suspect that by and large those with the most to gain/lose are those keeping the coolest heads and who also have genuine experience of running businesses, whilst those getting emotional about it have less understanding of operations and some may have imagined a quick trading profit, which hasn't materialised.

The company is in a strong position in a number of respects, not least superior product and strong order book. It's all about the cash at present and whether they can ramp up production quickly enough to avoid a further raise in a punitive market.

Investors have three options.

If you believe this is headed to the dogs and management aren't good enough, get out whilst you can with some capital preserved.

If you believe that they will manage this period and begin to generate enough free-flow to avoid a raise, buy at a steal of a £35m MC whilst you can.

If you believe that outcome is in the balance at present, then wait patiently for the April TU and re-assess then.

That's all there is to it really.